One of the most important parts of any tenancy is arranging a rental deposit, and yet an important piece of recent news regarding this has gone underreported.
The previous recognised legal limit for the size of a rental deposit was set at two months’ rent, and the proposed measure was to reduce that to a maximum of six weeks. Now the government has confirmed that the cap will be lowered further to a maximum of five weeks’ rent for any tenancy which has a total value of less than £50,000 per year. The cap will remain at six weeks’ rent for any tenancies valued at over £50,000 annually.
It is worth recognising that many landlords were unhappy with the initial reduction to six weeks, so much of the negative reaction when the cap was reduced by a further week was predictable enough.
However, overall this seems to be a positive move which is likely to save renters hundreds of pounds when entering a new tenancy. Given that gathering a new rental deposit is often the main impediment to people moving home, it can only be a good thing if mobility is increased. Keeping the rent capped at more than a month’s rent should also help to allay the fears of landlords who worry that tenants will simply run off and tell them to accept the deposit in lieu of the final rent payment which can leave them short in the face of maintenance or other costs.
There are some concerns that decreasing the rental cap to five weeks will make landlords less eager to rent, thereby making it harder for some to find suitable rental accommodation.
The CEO of the National Landlords Association, Richard Lambert, said of the unexpected change: “A six-week cap is the lowest landlords find acceptable. Does the Government really not realise that if landlords don’t think the deposit covers the risk of damage or unpaid rent, they will be even more cautious about who they let to? All this will do is make it harder for tenants with poor credit ratings or who want to have a pet to find a suitable home.
However, this feels like it will not turn out to be the case given that landlords are desperate to avoid long void periods for obvious reasons. It is rare to find a landlord that would leave their property void on a point of principle over a single weeks’ rent which, in any case, they cannot access in a deposit scheme. What could become harder is finding a rental home which accepts pets as landlords may view the increased potential for damage to the property as too much of a risk with a smaller deposit to recoup.
James Brokenshire, the communities secretary, said of the reduction: “Today’s amendments will make renting a home of your own more affordable, fairer and more transparent – enabling tenants to keep more of their cash and stopping unexpected costs.
“Everyone deserves a home to call their own. Yet for some renters, moving to a new house can be difficult due to high upfront costs and letting fees.
“This is unacceptable. I want to see a housing market that truly works for everyone, and one which provides a better deal for renters.”
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